Off With Their Feet!
Friday, 10/15/2021 09:01
Remove debt ceiling, equalize tax...
PREDICTABLY Janet Yellen was at the top of the news cycle again,
writes Bill Bonner in his Diary of a Rogue Economist.
Portrayed in the media as the "voice of reason" she is doing the same job as Secretary of the Treasury as she once did as head of the Federal Reserve.
Ms.Yellen has spent her whole career in academia or government. She has no direct experience with a real economy...or the banking industry...or Wall Street. She never met a payroll. And never had to satisfy a customer.
Widely regarded as "one of the most influential women in the world," she is using her influence, as she always has...shilling for the Deep State elite. Business Insider reports:
"Treasury Secretary Yellen says she wants to get rid of the debt ceiling as McConnell threatens another default standoff in 2 months."I will not be a party to any future effort to mitigate the consequences of Democratic mismanagement," he wrote to Biden."The US just barely avoided breaching the debt ceiling and defaulting on the national debt in October, and two of the main players are sounding different tunes on the future. Republicans are already firing warning shots about another fight coming in just two months, while some Democrats are eyeing ways to defuse the GOP's increasing use of the debt ceiling as a political grenade."Treasury Secretary Janet Yellen reaffirmed her support of getting rid of the debt ceiling on Sunday, only days after Senate Minority Leader Mitch McConnell insisted that Senate Republicans will have another debt-ceiling fight in December. His efforts to derail President Joe Biden's domestic agenda could risk a first-ever default on the national debt."
In the absence of real money, the feds no longer have to ask the voters...or lenders...for more money; they can "print" as much fake money as they want.
And the dead horse we've been beating here in the Diary is simply that both parties are in on this scam. Both gain from the printing-press money. Neither really wants it to stop.
Now, with debts soaring – the official estimate calls for $13 trillion of new federal debt over the next 10 years; it will surely be much more than that – the last thing the elite wants is something that could get in the way of more debt – a debt ceiling.
That is why Ms.Yellen, with the approval of almost the entire Elite Establishment, wants to do away with it.
The trouble with printing-press money is that it distorts and destroys the real economy. As the amount of "money" goes up, actual wealth – goods and services, measured by GDP growth – goes down.
Since 2000, the Fed has increased its core (money supply) holdings by more than 20 times. But GDP growth has been cut in half. From 1950-1999, real GDP growth averaged 3.6% per year. From 2000-2020, it has averaged 1.8%.
The new money shows up first in higher stock and bond prices (because the Fed buys bonds in order to push down interest rates...and finance the government's excess spending).
Later, it shows up in consumer prices. And by the look of things, "later" is coming soon. Here's The Wall Street Journal:
"Oil Jumps Above $80, Turbocharged by Supply Shortages"The extended climb in oil prices is leaving some other industrial commodities behind, a divergence that reflects bets that energy supply shortages will offset any slowdown in the global economy."US crude rose 1.5%...closing above $80 for the first time since late in 2014 and bringing its climb since the end of last October to 125%."
Goldman Sachs is planning for $90-per-barrel oil by the end of the year. And Ms.Yellen is looking ahead.
As consumer prices rise, consumers are going to get restless. And they're going to put pressure on their representatives to "stop the steal" of their money, via inflation.
At some point, when another debt ceiling hike is needed...they might even balk.
Better to get rid of the debt ceiling threat now.
Ms.Yellen is also pushing a "global minimum" tax rate for corporations. The US rate is currently 21%. Ireland, meanwhile, has a 12.5% rate. In Ms.Yellen's eyes, the Irish are getting away with something. Here's Bloomberg:
"Yellen Confident Global Tax Deal Will See Passage in Congress"US Treasury Secretary Janet Yellen expressed confidence that Congress will agree to a global minimum tax deal reached by 136 countries."Ireland has become the second-richest nation in Europe (based on GDP per capita), thanks largely to two things: its low corporate tax rate and its membership of the European Union. What exactly are the Irish getting away with by not taxing corporate profits heavily?"In the USA itself, states compete with each other to lure voters and industries. Based on U-Haul data, people in the US are moving from the high-tax, high-cost "Blue" states to the more relaxed, lower-tax "Red" states."
It's harder for people to move from country to country, but there is no doubt that many of the fastest-growing, most profitable businesses in the world set themselves up in Ireland to take advantage of the lower corporate tax rate.
As long as governments – state and national – have to compete with each other, politicians can't raise taxes too much, or make themselves too disagreeable. People will "vote with their feet"...and leave.
What Ms.Yellen is looking for – both in eliminating the debt ceiling...and equalizing tax rates – is to cut off their feet.
The two measures will make it easier for the elite to tax, spend, and print...while leaving the public to crawl on its knees, looking for a way out.
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